Kenai nixes property taxes on planes

By a vote of 6-1, the Kenai City Council approved a measure that exempts owners of aircraft based at the Kenai Airport from paying personal property tax on their planes or helicopters.

The idea of removing the property tax on aircraft was first approved by the city's airport commission, which said eliminating the city's tax would attract more private planes to Kenai's facility.

"This is something the commission has been looking at for some time as a way to improve commerce," Airport Commissioner Henry Knackstedt said Wednesday. "We think it will do that."

The council has been looking for ways to increase the number of planes based at the airport for some time now. Since locations in other parts of the Kenai Peninsula Borough now are subject to a flat tax, the council decided that to do away with Kenai's tax would place the city on a level playing field with airports in other parts of the borough.

Aircraft owners testified Wednesday that removing the tax at Kenai will likely attract more planes because Kenai's airport is superior to others in the area.

"We've got the best airport," Tom Thibodeau told the council.

Thibodeau said he believes that when aircraft owners around the state find out Kenai is as affordable as anywhere else in the borough, they'll move back to the airport.

"I think that you'll see some increased activity," he said.

Council members were not without concerns about removing the tax.

Council member Rick Ross said although he's in favor of increasing business at the airport, removing the tax for aircraft owners sets a dangerous precedent and could be viewed as unfair to other property owners in town.

He said he'd prefer to see the council delay action on the ordinance until some other options could be studied.

"I would like to see the administration explore some options and then go back to the (airport) commission," Ross said.

However, Airport Manager Rebecca Cronkhite said delaying action would not allow the airport to immediately go out and advertise the new rates.

"We'd like to get out there and use it as a marketing tool," Cronkhite said.

With the exception of Ross, the council agreed that taking action soon is more in the city's interest than further study.

"There's no more excuse, so to speak, not to come to Kenai because of the tax," council member Joe Moore said.

Council member Pat Porter also pointed out that if more aircraft come to Kenai, the city will benefit from revenues that come along with them, such as increased fuel sales.

"You're not going to generate those sales if you don't have a venue to make those people stay here," Porter said.

Council member Jim Bookey said he also supported removing the aircraft tax. However, he said he understands Ross' argument that the tax singles out one group of property owners over others.

Bookey pointed out that the idea that a decreased tax on aircraft will bring more planes is the same as saying lower property taxes will spur new business growth.

"Just remember folks, the same theory works with my mill rate as well," Bookey said.

Ross said he is worried that once aircraft are exempt from property tax, boat owners could come to the council asking for the same thing.

"I don't know how we could face the boat owners that come in and want the same thing," Ross said.

Despite Ross' objections, the council decided that increasing activity at the airport is too important to wait and voted down his motion to table the measure. The council then voted 6-1 to approve the new tax rules, which go into effect Jan. 1.

HEAD:Water, sewer rates raised

BYLINE1:By MATT TUNSETH

BYLINE2:Peninsula Clarion

The price of water in Kenai is going up --and so is the cost to get rid of it.

The Kenai City Council voted Wednesday to raise city water and sewer rates for the second straight year. This year's increase will cause the flat rate most people pay in the city to rise by $5 per month.

The rate increase was expected and is due to a number of factors that are largely out of the city's control. A city-commissioned study done in 2002 recommended the rate increases as a way to pay for upcoming repairs and maintenance, including fixes needed to take care of the problem of too much arsenic in city water.

The study, completed by the firm CH2M Hill, said the city should raise its rates for water by 30 percent and sewer by 35 percent. However, council members decided that smaller increases would be more appropriate and chose instead to gradually increase the rates over a period of a few years. Last year's increases were the same as this year's -- 10 percent for water and 12 percent for sewer services.

"The council didn't want to increase it as much (as recommended in the study)," Mayor John Williams said Wednesday.

The rate increases are expected to help raise an additional $5 million, which the city needs for its upcoming projects. According to Kenai Public Works Director Keith Kornelis, the fixes needed are unavoidable.

"The fact is, we need to have a little bit of capital to do these projects," he said.

In addition to removing arsenic from the water, the city also needs to make repairs at its sewer treatment plant and make water tank renovations.

Kornelis said the ongoing problem of having too much arsenic in the city's water supply is a problem that's not unique to Kenai.

"We're not the only ones," he said. "Arsenic is a big problem all over the United States."

In addition to the rate hike, the council also increased the amount of the deposit new customers must pay to $50 from $20.

Despite the hit city residents will take in higher bills, Kornelis said he believes Kenai's rates still are a pretty good deal compared to the rest of the state. He pointed to a study done in 2001 that showed Kenai's rates were lower than those of most Alaska cities.

"Even if nobody raised their rates, we would still be right there in the middle," he said.

Also, because some of the money will go toward improving the city's water and sewer efficiency, Kornelis said the rate increases will save the city in the long run.

"Some of these items will have a big payback in operating costs," he said.

In other action Wednesday, the council:

n Passed an ordinance that will provide for a maximum five-year period of reemployment for city employees who choose to participate in the Alaska Public Employees Retirement System opt-out program. The program allows city employees to opt-out of the PERS program then return to work for the city, thus saving the city thousands of dollars in retirement costs. However, under the provision passed Wednesday, those employees can only return to work for five years after they are rehired by the city.

n Voted to find that two pieces of city-owned airport land are not needed for a public purpose and can be sold. The two parcels, which are located along Marathon Road, have both gotten interest from individuals wanting to acquire the property, and the finding was needed in order for the city to go forward with future sales of the land.

n Transferred $2,500 from the general fund for the purpose of hosting a reception for Northern Dynasty Ltd., a company planning to develop a gold mine on the west side of Cook Inlet. The reception has not yet been scheduled.

n Awarded a $281,101 contract to Quality Electric for a project to improve the Kenai Airport's security system.